Bank of New York v. Baldwin

Full title: BANK OF NEW YORK v. STUART BALDWIN

Court: Connecticut Superior Court Judicial District of Fairfield at Bridgeport

Date published: Aug 13, 2009

2009 Ct. Sup. 13977 (Conn. Super. Ct. 2009)

Opinion

No. CV 08 501 90 44

August 13, 2009

MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

JOSEPH W. DOHERTY, JUDGE.

This is an action by the plaintiff, Bank of New York, seeking a foreclosure of mortgage, possession of the premises, money damages, attorneys fees, costs of suit, a deficiency judgment and other relief, against the defendant, Stuart Baldwin.¹

1 This case is one of approximately 12 foreclosure cases in which Stuart Baldwin is the defendant and in which he has raised the identical responsive pleadings to the complaint most significantly, his special defenses to the allegations in the complaints in each of those cases. The decision in the instant case granting the plaintiff's motion for summary judgment has been the same decision made in each of the other cases in which the same special defenses were raised.

BACKGROUND

On September 23, 2008, the Plaintiff, Bank of New York as Trustee for the Certificateholders CWALT, Inc. Alternative Loan Trust

2005-76 Mortgage Pass-Through Certificates, Series 2005-76 (the plaintiff), commenced this foreclosure action by service of process on the defendants Stuart Baldwin (the defendant) and Mortgage Electronic Registration Systems, Inc (Mortgage Electronic).² In the one-count complaint seeking foreclosure of a premises owned by the defendant, the plaintiff alleges the following facts. On September 14, 2005, the defendant executed a Promissory Note for $280,000, payable to Aegis Wholesale Mortgage Corporation (Aegis) in monthly installments. To secure the note, the defendant mortgaged the premises known as 291 Madison Terrace, in Bridgeport, Connecticut (the property) to Mortgage Electronic solely as nominee for Aegis. The mortgage deed was recorded on the Bridgeport Land Records on September 19, 2005. The mortgage was later assigned to the plaintiff. That assignment was also recorded on the Bridgeport Land Records. The unpaid balance of the note is $314,672.10, plus interest, fees and charges accrued from April 1, 2008. The plaintiff alleges that it is the holder of the note and mortgage, and that it has exercised its option. On September 23, 2008, the Plaintiff, Bank of New York as Trustee for the Certificateholders CWALT, Inc. Alternative Loan Trust

2 Mortgage Electronic is brought in as a defendant as it has interests subsequent to the plaintiff's mortgage. Specifically, a $35,000 mortgage dated September 14, 2005 and recorded September 19, 2005 in the Bridgeport Land Records.

2005-76 Mortgage Pass-Through Certificates, Series 2005-76 (the plaintiff), commenced this foreclosure action by service of process on the defendants Stuart Baldwin (the defendant) and Mortgage Electronic Registration Systems, Inc (Mortgage Electronic).³ In the one-count complaint seeking foreclosure of a premises owned by the defendant, the plaintiff alleges the following facts. On September 14, 2005, the defendant executed a Promissory Note for $280,000, payable to Aegis Wholesale. The plaintiff now seeks to foreclose upon the property by virtue of the defendant's nonpayment of the monthly installments of principal and interest due on May 1, 2008 and each month thereafter.

3 Mortgage Electronic is brought in as a defendant as it has interests subsequent to the plaintiff's mortgage. Specifically, a $35,000 mortgage dated September 14, 2005 and recorded September 19, 2005 in the Bridgeport Land Records.

The defendant filed an answer and two special defenses on October 22, 2008. On November 5, 2008, the plaintiff filed a motion for summary judgment and a memorandum of law in support of the motion in accordance with the Practice Book. The defendant filed a memorandum in opposition on January 2, 2009 and the plaintiff filed a reply memorandum on February 19, 2009. On March 13, 2009, the plaintiff submitted a supplemental memorandum in opposition. The court heard oral argument on March 16, 2009.

"Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). "As the party moving for summary judgment, the [movant] is required to support its motion with supporting documentation, including affidavits." Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 796, 653 A.2d 122 (1995). Likewise, "[t]he existence of the genuine issue of material fact must be demonstrated by counteraffidavits and concrete evidence." (Internal quotation marks omitted.) Little v. Yale University, 92 Conn.App. 232, 235, 884 A.2d 427 (2005), cert. denied, 276 Conn. 936, 891 A.2d 1 (2006).

In his answer, the defendant admits the allegations of the existence of the debt, the note, the mortgage, and his ownership of the property. The defendant then alleges two special defenses. The court intends to address the plaintiff's alleged prima facie case for foreclosure, and then address the defendant's special defenses.

I. PRIMA FACIE CASE OF FORECLOSURE

"In a mortgage foreclosure action, [t]o make out its prima facie case, [the foreclosing party has] to prove by a preponderance of the evidence that it [is] the owner of the note and mortgage and that [the mortgagor has] defaulted on the note." Franklin Credit Management Corp. v. Nicholas, 73 Conn.App. 830, 838 (2002), cert. denied, 262 Conn. 937 (2003).

The plaintiff moves for summary judgment on the ground that there is no genuine issue of material fact between the parties regarding the allegations found in the complaint. Specifically, the plaintiff argues that it is undisputed that it has established a prima facie case for mortgage foreclosure because: (1) the defendant "admitted the allegations regarding the debt, the note, the mortgage, its recordation and his ownership of the subject premises"; and, (2) the plaintiff has submitted affidavits establishing the recording of the mortgage and the status of the plaintiff as the owner of the mortgage and the holder of the note. Thus, the plaintiff argues that it is entitled to judgment as a matter of law. In support of its motion, the plaintiff submits (1) the signed and sworn affidavit of Lawrence M. Garfinkel, the attorney who performed and reviewed the title search on the property, (2) the signed and sworn affidavit of Melissa Saucedo, a litigation liason for Countrywide Home Loans, Inc.⁴ (Countrywide), (3) a copy of the note and mortgage (4) a copy of the assignment of mortgage, and (5) a copy of the warranty deed.

4 Countrywide Home Loans, Inc. is a prior holder of the note in question.

In his motion in opposition, the defendant argues that genuine issues of material fact exists because "the note at issue in this case is not a `negotiable instrument' as defined under [General Statutes] § 42a-3-104 . . ." and, therefore, the plaintiff cannot be considered a "holder" as defined by the Uniform Conmiercial Code (the UCC), and, as such, cannot bring a foreclosure action. Furthermore, the defendant argues that the affidavit of Melissa Saucedo "does not bind plaintiff" because "[t]he affidavit nowhere affirmatively states Ms. Saucedo has legal authority from the plaintiff to opine as to any facts alleged by the plaintiff." In its reply memorandum, the plaintiff argues that the note is a negotiable instrument under the UCC because the defendant unconditionally promised to repay a fixed amount of $280,000, plus interest, and that merely because the note provides several repayment options does not change the fixed nature of the note's value.

In the present case, the plaintiff has submitted two affidavits with its memorandum of law. The defendant has challenged the validity of the affidavit of Melissa Saucedo, which attempts to authenticate a copy of the promissory note and its endorsements. The defendant argues that Melissa Saucedo is not a competent affiant, pursuant to Practice Book § 17-46, as her affidavit fails to state that she has the legal authority to "opine as to any facts alleged by the plaintiff."

Practice Book § 17-46 "sets forth three requirements necessary to permit the consideration of material contained in affidavits submitted in a summary judgment proceeding. The material must: (1) be based on `personal knowledge'; (2) constitute facts that would be admissible at trial; and (3) affirmatively show that the affiant is competent to testify to the matters stated in the affidavit." Barrett v. Danbury Hospital, 232 Conn. 242, 251, 654 A.2d 748 (1995). The Saucedo affidavit provides that she is over eighteen years of age, is a "litigation liason" for Countrywide, the servicer for the plaintiff, that she is familiar with the record keeping practices of Countrywide and that she has personal knowledge of the facts stated in the affidavit. The court finds that the Saucedo affidavit is sufficiently based on personal knowledge and that Saucedo is competent to testify as an affiant pursuant to the requirements of Practice Book § 17-46.

In his motion in opposition, the defendant challenges the nature of the promissory note submitted by the plaintiff. Specifically, the defendant argues that the promissory note was not a negotiable instrument "because it is an option ARM, ⁵ which does not provide for the repayment of a `fixed amount of money'" and therefore was "not a `negotiable instrument' within the meaning of the U.C.C." Thus, the defendant argues that because the note is not a negotiable instrument, the plaintiff cannot be a holder of the note, and that, therefore, the plaintiff cannot effectuate this foreclosure action.

5 ARM refers to an adjustable rate mortgage.

General Statutes § 42a-3-104, entitled "Negotiable Instrument," states in relevant part: "(a) `negotiable instrument' means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it: (1) Is payable to bearer or to order at the time it is issues or first comes into possession of a holder; (2) Is payable on demand or at a definite time . . ."

The defendant argues that "it is clear from the language of the Note itself . . . that the amount of money that was to be repaid to plaintiff with interest was not fixed, but in fact a variable number." He argues that the "option ARM" "transfers control of the principal balance to the borrower by allowing the borrower to decide on a monthly basis how much accrued interest to add to the prior month's original balance." Thus, the defendant asserts that, because the promissory note allowed for a minimum payment of less than the interest due each month, it does not contain a fixed sum certain, as required by § 42a-3-104. In support of this, the defendant notes that the principal on his loan increased from $280,000 to $314,672.10, due to his ability to pay less than the interest due. The defendant concludes that because the principal has increased, the note is not for a "fixed amount of money."

At oral argument, the defendant cited to Diversified Financial v. Hill, 99 S.W.3d 349 (Tex.App.2d, 2003), to support his claim that an "option ARM" is not a negotiable instrument. After reviewing this Texas decision, the court finds that the case can be easily distinguishable from the facts in the present matter. In Hill, the instrument in question was found not to be a negotiable instrument because, while it contained a promise to pay $50,000, it "also contemplated that multiple advances were allowed and that $50,000 was the maximum Hill Gilstrap could have borrowed. The note also stated that the credit arrangement was open-ended, meaning the $50,000 could have been borrowed more than once as long as the balance was paid off each time. Both parties agreed at the time the note was signed that Commonwealth had advanced $13,000 to Hill Gilstrap and that future advances were contemplated." Id., 354. Thus, while the court did hold that "the note is not for a fixed amount of money and is not a negotiable instrument"; Id., 358; it did so specifically because the note's open-endedness allowed the court to determine that there was no fixed sum certain.

The present matter does not present the same situation. The defendant's note does not contain an open-ended contemplation of multiple, future and repeat advances. Instead, paragraph one of the note is definitive. It states "[i]n return for a loan that I [the defendant] have received, I promise to pay U.S. $280,000.00 (this amount is called "Principal"), plus interest, to the order of the Lender." Paragraph (B) of the Definitions section of the note defines "Note" as "the promissory note signed by Borrower and dated September 14, 2005. The Note states that Borrower [the defendant] owes Lender TWO HUNDRED EIGHTY THOUSAND and NO/100 Dollars (U.S. $280,000.00) plus interest. Borrower has promised to pay this debt in regular Periodic Payments and to pay the debt in full not later than October 1, 2045."

Furthermore, the court finds that were the defendant's assertion that a fixed sum certain cannot exist in an "option ARM," then the only way that a negotiable instrument would ever feasibly exist is when a borrower pays exactly the monthly interest accrued, not a penny more or less, so as to keep the principal exactly the same from month to month, as any other payment amount would change the principal, and thus, create a variable sum. This is clearly an implausible result. Accordingly, the court is unpersuaded by the defendant's argument that there is a material fact in issue regarding the present note's application of a fixed sum certain. The note clearly establishes that the defendant agreed to the acceptance and repayment of a fixed sum certain of $280,000 plus interest, as allowed by § 42a-3-104.

Accordingly, the plaintiff has established its prima facie case for foreclosure, in that it is the holder of the note and mortgage and that the defendant defaulted on the note. The defendant has not established the existence of any disputed material fact as to the note or the mortgage. Thus, the court must now analyze the defendant's special defense arguments, in order to determine if summary judgment is appropriate.

II. SPECIAL DEFENSES

The defendant raises the two special defenses in his answer, as follows: (1) "The plaintiff has not alleged and cannot prove that it owns the note and the mortgage" and therefore the plaintiff lacks standing to enforce the mortgage though foreclosure; and, (2) "the fair value of the property exceeds the amount by which the plaintiff is claiming," and therefore an offset or credit should be granted to the defendant.

In addressing the defendant's special defenses, the plaintiff first argues that the special defenses are generally invalid because they are legally insufficient as a matter of law, and should not preclude summary judgment. Regarding the first special defense, the plaintiff argues that it "is in possession of the original note endorsed in blank and therefore has standing to pursue this foreclosure." As to the second special defense, the plaintiff argues that it is not a recognized special defense to a foreclosure action, and that it does not attack the making, validity or enforcement of the note and mortgage.

The defendant counters that, regardless of the plaintiff's position as a "holder," the plaintiff has not established that it is the "owner" of the note and mortgage. The plaintiff, in its reply memorandum, reiterates that it has standing because (1) it is presently in possession of the original note, which was endorsed in blank, (2) has submitted evidence that it was assigned the original mortgage and (3) has not further endorsed, negotiated or delivered the note to any other entity.

"When a complaint and supporting affidavits establish an undisputed prima facie case for a foreclosure action, a court must only determine whether [a] special defense is legally sufficient before granting summary judgment." (Internal quotation marks omitted.) Bank of New York v. Conway, 50 Conn.Sup. 189, 195, 916 A.2d 130 (2006); LaSalle National Bank v. Shook, Superior Court, judicial district of New London, Docket No 549266 (July 13, 2000, Martin, J.), aff'd 67 Conn.App. 93, 787 A.2d 32 (2001) [ 29 Conn. L. Rptr. 462].

"The purpose of a special defense is to plead facts that are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action . . . A valid special defense at law to a foreclosure proceeding must be legally sufficient and address the making, validity or enforcement of the mortgage, the note or both . . . Where the plaintiff's conduct is inequitable, a court may withhold foreclosure on equitable considerations and principles." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 705, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).

"A plaintiff in a foreclosure action can challenge a special defense by summary judgment in three ways. The first way to challenge a special defense is to argue that the special defense does not address the making, validity and enforcement of the mortgage . . . The second way to challenge a special defense is to challenge its legal sufficiency . . . The third way to challenge a special defense is to show that there is no genuine issue of material fact based on the evidence . . . Even if a special defense is a valid defense to a foreclosure action, and even if such a defense is sufficiently pled, the defendant still must produce sufficient evidence to support the defense in order to survive summary judgment." (Citations omitted.) WM Specialty Mortgage, LLC. v. Brandt, Superior Court, judicial district of Ansonia-Milford, Docket No. CV 09 5001157 (February 10, 2009, Moran, J.T.R.); see also Mechanics Savings Bank v. Walker, Superior Court, judicial district of Hartford, Docket No. CV 91 0500701 (March 9, 1995, Corradino, J.) ( 14 Conn. L. Rptr. 129). ("A contrary ruling would in effect mean that whenever a special defense is filed in a case it cannot be disposed of by way of summary judgment, at least as long as it raises factual issues.")

The plaintiff challenges the defendant's first special defense under the third option, by attempting to show that there is no issue of material fact in question that "the plaintiff is in possession of the original note endorsed in blank and, therefore, has standing to pursue this foreclosure." The defendant's first special defense claims that the plaintiff does not have standing to enforce any of the note or mortgage provisions.

The court has already determined that there is no material issue of fact regarding the present note's nature as a negotiable instrument. The defendant now argues that "[p]laintiff has only provided a copy of a Note endorsed to Countrywide Home Loans, Inc. . . . Plaintiff has not provided any evidence that the Note was in fact endorsed over to it" and, therefore, material issues of fact exist as to the plaintiff's standing. The court finds that this is incorrect.

The plaintiff has alleged in the foreclosure complaint that it is the holder of the note endorsed in blank and that is it the assignee of the mortgage. While the note is endorsed to Countrywide Home Loans, Inc., it is also subsequently endorsed in blank. "Endorsed in blank" is a statutorily recognized concept in Connecticut. General Statutes § 42a-3-109(c) states in relevant part: "An instrument payable to an identified person may become payable to bearer if it is endorsed in blank pursuant to section 42a-3-205(b)." Section 42a-3-205, provides that "(a) If an endorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the endorsement identifies a person to whom it makes the instrument payable, it is a `special endorsement' . . . (b) If an endorsement is made by the holder of an instrument and is not a special endorsement, it is a `blank endorsement.' When endorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially endorsed." The plaintiff has submitted properly authenticated evidence of the note endorsed in blank, has alleged that it is the holder of that note, and has offered to make the original document available to the court.

Additionally, the plaintiff submitted the affidavit of Lawrence M. Garfinkel, in which he attests, based on a title search, that he found that the mortgage in question was assigned to the plaintiff. The documents found by this search are properly certified and attached to the affidavit. The defendant does not refute this evidence.

The court finds that the plaintiff has met his burden of showing that there is no genuine issue of material fact regarding its possession of the note endorsed in blank. The plaintiff has also established the assignment of the mortgage to the plaintiff. The defendant has not submitted any evidence that would establish a material fact that the plaintiff is not in possession of the note endorsed in blank, nor the assigned mortgage. Accordingly, the defendant's first special defense is invalid and should not preclude a finding of summary judgment in this foreclosure matter.

The plaintiff attacks the legal sufficiency of the plaintiff's second special defense. The court finds that the defendant's second special defense is insufficient as a matter of law because, while it does plead facts that may be consistent with the allegations of the complaint, it does not establish that the plaintiff does not have a cause of action, nor does it attack the making, validity or enforcement of the note and mortgage. See Southbridge Associates, LLC. v. Garofalo, 53 Conn.App. 11, 19, 728 A.2d 1114 (1999). Rather, the defendant merely argues that the fair value of the property exceeds the value of the note and thus he should be granted an offset or credit. As the second special defense does not address the making, validity and enforcement of the mortgage, the court finds that the defendant's second special defense is insufficient as a matter of law and should not preclude a finding of summary judgment in this foreclosure matter.

For the foregoing reasons, the court finds that the plaintiff has established its prima facie case for foreclosure, as there are no issues of material fact in question regarding the nature of the promissory note or the plaintiff's standing to execute the provisions of the note. Furthermore, the defendant's special defenses are insufficient to preclude this court from granting this motion for summary judgment.

The plaintiff's motion for summary judgment is hereby granted.